Stir the Pot

That’s the point of social democracy: It’s not just that working people get an extra chicken in the pot; more important, they get the right to stir the pot.

— Thomas Geoghegan

In this week’s Sift:

The Sift Bookshelf: Were You Born on the Wrong Continent? We Americans don’t know much about how things work in Europe. We should. In an economy a lot like ours, ordinary people are better off. They have more free time, more access to high-quality public goods, and less to worry about.

Short Notes. Thomas Friedman explains why the Iraq War was “unquestionably worth doing”. Katy Perry’s video is banned on Sesame Street. If money is speech, three billionaires are speaking really loud. Democrats don’t have to run wimpy campaigns. Jon Stewart examines the Republican “Pledge to America”. And more.

Well, this week’s book talks about how things can work better: the sick can get care, the old can retire in comfort, education can be free, cities can be safe and beautiful, and society can start re-orienting itself in a greener direction. And best of all, this isn’t a happening in a visionary Utopia, it’s happening in a continent: Europe.

The non-collapse of the European welfare state. Here in the U.S., we’ve been hearing for decades that the European system doesn’t work and is headed for disaster. Back in the 70s, I saw a 60 Minutes piece about the crazy welfare state of the Netherlands, where all kinds of silly things were subsidized, taxes were spiraling upward, and soon no one would bother working because they could do just fine sitting around and collecting welfare.

You know how the Netherlands is doing, nearly 40 years after that dire assessment? Better than we are. Wikipedia lists 2009 per capita GDP according to three different sources: the IMF, the World Bank, and the CIA. The Dutch beat us in all three. Unemployment in the Netherlands is 4.8%, about half of our rate. And the unemployed Dutch are much better off than unemployed Americans, because … well, because the Netherlands is still a crazy welfare state.

Maybe over the years you’ve seen the same Europe-is-collapsing story about Sweden or Norway. They’re doing fine too. Norway has 3.5% unemployment, Sweden 8.5%. Sweden’s per capita GDP is a little less than ours, but Norway’s is a lot more. (North Sea oil has something to do with that.)

America’s conservative propagandists have realized that they can say anything they want about Europe, because most Americans will never go there. Most of the ones that do go will get their pictures taken in front of the Eiffel Tower or have a genuine Oktoberfest beer in Munich, but they won’t learn the local languages, read the newspapers, talk to the natives, or learn much of anything about how the countries actually work.

So during the debate over the Obama health-care plan, we heard the most amazing things about socialized medicine in Europe: long waits for care, no access to the latest treatments, letting the old die to save money, and so on. Pretty much none of that is true, but who cares? You can say anything about Europe. (A fairer comparison of the U.S. and French health systems appeared in — of all places — Business Week. See this summary table. BW covered the waiting-time issue here.)

Germany and France. Advocates of American-style capitalism brush off the comparisons to small countries. Put together, Norway, Sweden, and the Netherlands have a population somewhere between Texas and California — a little over 30 million. But Germany and France put together have about 150 million people, about half the size of the U.S. Compare us to them, people say, and you’ll see the American advantage.

Well, sort of. The U.S. is 11th on the CIA’s per-capita-GDP list ($46,400), while France is 16th ($41,600) and Germany 18th ($40,700). The difference is even greater when the CIA figures in the over-valuation of the euro and other local factors to come up with something called “purchasing power parity” GDP. Since dollars are the measuring unit, the U.S. stays the same ($46,400), while France ($32,800) and Germany ($34,100) drop.

That extra $12-14K per person makes Americans better off than Germans or the French, right?

Not exactly. First you have to adjust for inequality — our concentration of very rich people pulls up the averages without making life any better for the ordinary person. It’s tricky to find the exact statistic you’d want, but this source does a reasonable job of estimating the median rather than the average. Now the US is at $37,100, Germany at $31,300, and France at $29,500.

So that extra $6-8K per person makes Americans better off than Germans or the French. Right?

Were you born on the wrong continent? That’s where Thomas Geoghegan takes up the argument. He’s a labor-union lawyer from Chicago who goes to France, spends some serious time in Germany, and then explains why life is better over there for ordinary people.

Before I get into his book, two caveats: First, Geoghegan writes in a chatty that-reminds-me-of-a-story style that you will either love or hate. So this is not a book you can hand to your conservative cousins, because they’ll throw it down in disgust by about page ten. Second, I think Geoghegan’s numbers are spun slightly — not false, but not always measuring the right thing. (The difference isn’t extreme — about par for the course in books with a point of view.) So I’ve gone looking for my own numbers rather than just repeating his.

Geoghegan makes a few arguments to knock the numbers down, and then goes into intangibles. Let’s start with the numbers.

First, the main reason the Europeans make less money than Americans is that they work fewer hours. They get more vacation, more holidays, and work less overtime. In 2004, the average American worker put in 1777 hours per year, while the French average was 1346 and the German 1362. So to get your household’s extra $6-8K per person, the workers in your household each put in an extra 400 hours. (Picture a family with two working parents and two kids: 800 extra working hours produce about $28K more money.)

Geoghegan argues that even 400 hours is an underestimate, because Americans are pressured to put in off-the-clock hours, while Europeans tend to knock off early. Also, Americans are more likely to live in suburbs or edge cities from which they spend a long time commuting. Those don’t count as working hours in the stats, but they’re not free time either.

Public goods. Purchasing-power statistics underestimate the European lifestyle, because Europeans have access to high-quality public goods that are expensive for Americans to duplicate privately. (That’s the dark side of President Bush’s vision of an “ownership society“.)

In America we are short-changed on public goods, though there are still enough around to make the point: I live in an apartment, so I have no yard and much less space for books than I would like. But two blocks in one direction is Mine Falls Park, where I once shot a blurry photo of a wild mink. Two blocks in the other direction is a very nice public library. Imagine how rich I would have to be to provide that level of luxury for myself, by owning things, rather than by living in a city that owns them for me.

Ordinary Europeans may be poorer than we are as individuals, but they are collectively richer. They have smaller cars and pay more for gas, but they also have better, cheaper, safer public transportation. They don’t have huge suburban houses, but they don’t need them, because their cities are safe and provide good public schools. They enjoy public art that they could never afford to buy or display in their homes. They’re less likely to have elaborate playscapes in their yards, but the public parks are clean and safe and beautiful.

You can measure the cost of such things in terms of taxes, but how do you measure their value?

Risk and competition. Europeans have less need to pile up money than we do, because they are exposed to less risk. If they get sick, they’ll get health care. Their kids’ education is paid for, even college. When they retire, they get a pension. If their aging parents have to go to a nursing home, the state takes care of it.

So a German with nothing in the bank is in much better shape than an American with nothing in the bank. In spite of that, the Germans save more than we do and take on less debt.

Plus, there’s a more subtle effect. European society is set up for most people to succeed, so there is less competitive pressure to make sure you (or your child) gets to the top. That is another reason Americans need money.

For example, state universities in the U.S. may not be free, but some are considerably cheaper than private schools. Annual in-state tuition at the University of Arkansas, for example, is only $6768 — one of the cheapest I could find and far less than the $36,640 at Princeton. But in an economy where only a few people really succeed and the unsuccessful face so many risks on their own, is U of A good enough? Don’t you have to send your kid to Princeton if you can?

Producer spending vs. consumer spending. One very insightful concept in Geoghegan’s book is the difference between producer and consumer spending. An awful lot of the extra money we get for working extra hours is spent on things we need only because we work so much. It looks like consumption in the stats, but it really is a cost of production.

In the stats, a Parisian couple enjoying a leisurely night out at the bistro looks just like an American mom picking up some KFC on the way home because she had to work late and there’s no time to cook. ﻿﻿﻿

﻿﻿﻿As we work longer hours, we really do need to eat out, bring in housecleaners, and in general contract out our lives. As I say, these are not so much “consumer” but “producer” wants. We need computers so that we can work at home, i.e., on weekends, late at night, etc. … We are not so much “consuming” as we are “investing” in ourselves as human capital.

How do they do it? If you listen to American conservatives, European socialism is all about “redistribution” — taking money from productive people and giving it to unproductive people. And there is a kernel of truth there: European governments do make more transfer payments — unemployment compensation, welfare, etc. — than our government does.

But that’s not the heart of the difference. In Europe, the working classes have more power to shape the system, so equality is built into the way things work, not just pasted on after-the-fact by transfer payments. The poster child here is Germany. By law, German corporations practice co-determination (mitbestimmung). Half the people on a corporate board are elected by the workers. Shareholders have a tie-breaking vote, but on any issue where the workers’ representatives are united and the shareholders aren’t, the workers’ interest prevails.

That explains why the Germans haven’t shipped all their manufacturing jobs to China.

Germans also practice regional industry-wide collective bargaining: All competing companies are committed to pay the same wages for similar job classifications, so none can get an advantage by squeezing its workers harder.

This is an important point to understand about cost-cutting in American corporations. Often it has nothing to do with efficiency or innovation. A company can cut costs just by paying people less, or by insisting that they do more for the same money. That kind of cost-cutting just re-slices the pie without doing anything to make it larger.

When one American company manages to squeeze its workers harder, its competitors are driven to follow suit in a race to the bottom. For example, when WalMart supermarkets came to California, the other groceries chains demanded cutbacks. Business Week reported﻿: ﻿﻿﻿

﻿﻿﻿The industry’s goal is to bring its health-care costs more in line with those of nonunion Wal-Mart Stores (WMT). The retail giant’s medical plan covers fewer than half its workers, and its sales clerks earn less, on average, than the federal poverty level.

When the dust settled, the real economy hadn’t changed — the same workers did the same jobs, for the most part — but they just made less money. That couldn’t have happened in Germany, because WalMart would have been covered by the same collective bargaining agreement as the other groceries.

The work rules in German businesses are interpreted by works councils, who are also elected by the workers. Geoghegan explains﻿﻿: ﻿﻿﻿

﻿﻿﻿That means you help manage the place. On layoffs and other issues, the employer has to reach an agreement with the works council. So you help decide when to open and close the store. You help decide what shift someone gets. You help decide if someone gets fired. (No, I’m not kidding.) … That’s the point of social democracy: it’s not just that working people get an extra chicken in the pot; more important, they get the right to stir the pot.

At any moment, about half a million German workers are serving on works councils. Millions more have served at one time or another. That experience, Geoghegan claims, makes them politically aware and motivates them to stay informed. Geoghegan believes that’s the reason German newspapers are fat and widely read﻿﻿: ﻿﻿﻿

﻿﻿﻿78 percent of Germans read a newspaper every day for an average of twenty-eight minutes.

Competitiveness. Hearing all that, an American pictures bloated organizations that can’t compete globally and will soon be run out of business — if not by us, by the Chinese. But that’s not happening. According to the CIA, Germany exports more than the United States and only slightly less than China. Per capita, Germany exports almost four times as much as we do.

German industry survived, Geoghegan claims, precisely because its corporate structure forced it to compete on quality rather than wages. ﻿﻿﻿

﻿﻿﻿in the U.S. and the U.K., we got out of manufacturing because the labor costs were too low. We took the path of least resistance, competing on the basis of labor costs. Then, when that didn’t work, it was so much easier to shut down.

So low-wage South Carolina stole the textile industry from high-wage Massachusetts — for a few years, until the jobs moved on to Mexico or India or China.

Think about how often you hear that American workers need to tighten their belts, because we have to compete with the Chinese. To be more competitive, we need even deeper cuts in rich people’s taxes and government benefits for the rest of us. We have to accept even more individual risk, work even longer hours, and be less particular about the environment and food safety and whether we’re killing our miners.

Well, why should anybody (other than the Daily Show) tell you? Last April, Wyatt Cynac went to Sweden to expose the socialist nightmare. Part I. Part II.

Short Notes

Assuming that the Iraq War is over now, Thomas Friedman tells Charlie Rose that it was “unquestionably worth doing“. What does Friedman think we got for our trillions of dollars and thousands of lives? We got to send a message to Middle Eastern Muslims: “Suck on this.”

I’m increasingly amazed that Friedman is treated as if he were an insightful thinker, or even a sane one.

Racy movies used to advertise that they’d been “banned in Boston”. Well, this Katy Perry video is too hot for Sesame Street, for what that’s worth. At least she didn’t wear this.

After their 2006 and 2008 disasters, the Republicans went into a period of soul-searching, promising to come back with new ideas. Now the fruit of their labors: their Pledge to America.

Jon Stewart brilliantly cuts between the new pledge and old footage of Republicans saying the exact same words in previous years. He sums up with the image of an abusive ex-boyfriend who wants a second chance﻿:﻿﻿

“Baby, I know you left me. But if we get back together I pledge to you, I promise you I will still try to f**k your sister every chance I get. It’s who I am, baby.”

The media does this all the time with polls: Obama’s agenda is assumed to be liberal, and then if a poll says people disagree with it, pundits assume that the people want something more conservative.

Well, maybe not. According to a new poll by Associated Press, the number of people who wish the health reform bill did more is double the number who wish it did less.

Comments

Excellent analysis. I'd like to see you include in the analysis, the Europeans' attitudes toward birth/population control. Europeans, given their small space compared to the United States, seem to have a better understanding of limited availability of scarce resources.